Understanding the terms "par value" and "face value" is crucial when investing in bonds. While often used interchangeably, they refer to the principal amount the issuer promises to repay the investor at the bond's maturity. This fundamental concept
Basics
Do You Get All Your Money Back When a Bond Matures?
Understanding what happens at maturity is crucial for your financial planning when investing in bonds. At its core, a bond represents a loan to an issuer who promises to repay the principal at maturity. However, the complete picture of your returns
How Currency Denomination Impacts on Risks and Returns of a Bond?
Understanding how currency denomination impacts the risks and returns of your bond investments is crucial. Investing in bonds issued in currencies other than yours introduces currency risk into your portfolio.Fluctuations in exchange rates can
How Does Term to Maturity Affect Interest Rates?
Understanding how term to maturity impacts interest rates is crucial for your investment success. This fundamental connection influences everything from your portfolio returns to risk management strategies. As you delve into this guide, you'll
Why Would You Pay More Than Face Value for A Bond?
As a fixed-income investor, you might encounter situations where you're willing to pay more than the face value (par value) for a bond. This seemingly counterintuitive decision arises when prevailing interest rates decline, making existing bonds with
Can You Lose Money on Bonds if Held to Maturity?
The fixed-income market offers stability through predictable income streams and the return of principal at maturity. However, you need to understand that holding bonds to maturity doesn't guarantee freedom from losses.While most bonds return
Maturity Date: Essential Guide to Understanding Your Investment’s Final Payment Timeline
A maturity date determines when you'll receive your full investment back. Understanding this critical financial timestamp helps you make informed investment decisions and plan your future income effectively. Whether you're investing for the first
Understanding Bond Prices: Above, At, and Below Par
When investing in the bond market, you'll encounter bonds trading "above par," "at par," and "below par." These terms describe the relationship between a bond's market price and face value, providing crucial insights into market conditions and its
Why Does Collateral Lower Your Interest Rate?
Collateral significantly lowers your interest rate by reducing the lender's risk exposure. Understanding how collateral functions is crucial for making informed investment decisions as a fixed-income investor. Collateral acts as a safety net for
What Are Common Bond Features?
Understanding the key features of bonds, such as maturity, coupon rate, tax status, and callability, is crucial for any fixed-income investor seeking to make informed investment decisions. These features significantly impact a bond's risk profile,
Why Are Collateral Bonds Considered a Safer Investment Than Stocks?
Collateral bonds: a safer investment than stocks? This article explores the relative safety of collateral bonds compared to stocks, examining the key features that make them a more conservative investment option for many investors. We'll delve into
Call Features: Risks & Rewards When Issuers Redeem Bonds Early and What It Means for You
Call features are a key aspect of many bonds, granting the issuer the right to redeem the bond before its scheduled maturity date. Understanding how these features work is crucial for fixed-income investors, as they can significantly impact